Which parent should claim a college student as a dependent?

If you and your spouse are divorcing in Clinton Township, Michigan, and you have a high school or college aged child, you may be concerned about how the divorce will affect your child’s college education. There are tax implications for divorced parents of college students, so it must be decided beforehand which one of you is going to claim your child as a dependent once he or she enrolls.

U.S. News reports that as parents of a full-time college student, you or your spouse may be eligible for a tax credit known as the American Opportunity Tax Credit. However, if you are divorced, only one of you may claim the credit. It typically goes to the custodial parent, who claims the adult child as a dependent. The divorce settlement will include that information, but if it is not allocated to the right person, the credit may not benefit either of you.

You may feel that the agreement is fairer if it goes to the parent who makes a higher income. When you have a child in college, though, that may not be the best option. The AOTC is limited by income, and according to the Internal Revenue Service, a single parent cannot have a modified annual gross income of more than $80,000 to claim the full credit. If you or your ex-spouse has remarried, the stepparent’s income is also included, and the limit is $160,000.

Making decisions such as these during a contentious separation may be difficult, but being able to come to an agreement may save you or your child’s other parent thousands of dollars. Although it is not an asset, the tax credit is a significant benefit that should be assigned in your property settlement agreement. This information about the American Opportunity Tax Credit is intended for educational purposes only and should not be taken as legal advice.

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